On January 15, 2016, the Supreme Court granted a writ of certiorari in Cuozzo Speed Technologies v. Lee, giving the Court its first opportunity to weigh in on the trial process of the relatively new Patent Trial and Appeal (“PTAB”) review proceedings.  The Court will review (1) whether “broadest reasonable interpretation” (“BRI”) is the appropriate claim construction standard in an inter partesreview; and (2) whether an institution decision is judicially reviewable.  Both issues have a profound impact on patent owners and patent challengers in these proceedings.  The Court’s decision is expected as early as July 2016.

Implications for patent owners and challengers

Patent challengers (“petitioners”) have had enormous success invalidating patent claims before the PTAB in inter partes review, covered business method review, and post grant review proceedings.  Roughly 70% of petitions are instituted, and institution decisions are currently not appealable.  Once instituted, roughly 90% of such petitions result in at least one canceled patent claim.  Although many factors contribute to the success or failure of a petition, the BRI standard is one factor favoring petitioners.  Accordingly, the Court’s forthcoming decision relating to both the BRI standard and the appealability of institution decisions has significant implications for all parties.

What SCOTUS will deliberate

The specific questions the Supreme Court will consider are as follows:

  1. Whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
  2. Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board's decision whether to institute an IPR proceeding is judicially unreviewable.

As to the first question, inter partes review, covered business method review, and post grant review proceedings became available in 2012, and the PTAB has since applied the BRI standard for claim construction in these proceedings.  The PTAB does not apply the same standard as is used in the district courts.  The district courts apply the standard set forth in Phillips v.AWH Corp., wherein claim language is given its plain and ordinary meaning, unless otherwise defined by the specification or limited during prosecution.  The PTAB proceedings were intended to be a lower cost and quicker alternative to district court litigation for challenging the validity of patent claims, and so one issue the Supreme Court will consider is whether the PTAB must apply the same “plain and ordinary meaning” standard as the district courts.  Applying the same standard would make it more difficult to invalidate patent claims before the PTAB.

Patent owners theoretically have the ability to amend patent claims in proceedings before the PTAB, a mechanism not available to defendants in district courts.  The Federal Circuit majority in Cuozzoreasoned that a patent owner’s ability to amend claims in an IPR further supported application of the BRI standard.  That is, although the BRI standard is a broader standard than that used in the district courts, patent owners have an ability to address prior art and narrow patent claims to avoid invalidation.  In practice, successful motions to amend are extremely rare.  Judge Newman noted in the dissent in Cuozzo that the right to amend claims in an IPR is “almost entirely illusory.”  Accordingly, a change in the applicable claim construction standard would benefit patent owners.

As to the second question, patent owners stand to benefit if the Supreme Court agrees that institution decisions should be reviewable, given that the majority of institution decisions are presently favoring petitioners.  Another potential benefit to patent owners is the timeline.  The shortened, predictable timeline for PTAB proceedings has been a key factor in district courts deciding whether to stay litigation pending before them in view of instituted review proceedings.  If the Supreme Court agrees that institution decisions should be appealable, this may also benefit patent owners by increasing the timeline of PTAB proceedings, or at least making the timeline more unpredictable, thus weighing against stays in the district courts.  Further, the timeline of PTAB proceedings is governed by statute, and the pace of the proceedings is already relatively compressed for all parties.  Accordingly, if a party was able to appeal an institution decision, it is unclear how that would impact the pending PTAB trial.

Actions to consider

Given that the Supreme Court has not yet made any determinations on these issues, parties involved in or considering PTAB proceedings will not need to take any major actions at present.  However, the following actions should be considered:

  • Patent owners may consider filing an appeal of a decision instituting trial, so as to preserve the right to do so should the Supreme Court decide that appeals are available.
  • Given the potential for appealability of institution decisions, petitioners should file inter partesreview, covered business method review, and post grant review petitions and any corresponding motions to stay district court proceedings as soon as possible.Patent owners should highlight the Cuozzo writ of certiorari, emphasizing that the timeline for resolving PTAB proceedings may not be as predictable as it was pre-Cuozzo.
  • Both patent owners and petitioners should consider arguing claim construction issues under both standards, given that a Supreme Court decision on the appropriate claim construction standard should be issued in the middle of 2016.

Conclusion

  • The Supreme Court’s review of the BRI standard and the appealability of institution decisions in PTAB proceedings has significant implications for patent owners and challengers.  If the Supreme Court heightens the claim construction standard, it would be more difficult to invalidate patent claims before the PTAB.  Further, if institution decisions were appealable, patent owners would have another mechanism for fighting and delaying review of patent claims, and the timing for resolution of these proceedings would increase, potentially impacting district court’s willingness to stay cases pending review.  Both issues have the potential to swing the pendulum more in favor of patent owners in proceedings that, so far, have been largely in favor of patent challengers.